Ex-IRS district director admits tax fraud scheme

A Vista man who once served as a district director for the
Internal Revenue Service has pleaded guilty to a tax fraud scheme
that took more than $1.3 million from the IRS.

Jesse Ayala Cota, 65, faces a federal prison sentence of up to
five years, federal officials announced Friday.

Cota admitted in court to his role in defrauding the federal
government, as well as to earning more than $300,000 in his two
years as part of a scheme that prosecutors said preached misleading
tax avoidance methods.

Cota was a part of a Topeka, Kansas-based company known as
Renaissance, The Tax People Inc., that marketed a program designed
to sell - through false and misleading representations - what the
government said was a method of taking illegal tax deductions,
according to Cota's plea agreement. The plea deal was filed with
the federal court in Kansas on Thursday.

Cota could not be reached for comment. One of his attorneys,
Beverly Hills-based Dennis Perez said late Friday afternoon that
Cota is "disappointed by the recent turn of events."

"However, he does accept full responsibility for anything that
he has done here," Perez said. "It is his hope that the judge will
recognize his true character and grant him a more lenient
sentence."

According to the indictment, Renaissance offered a number of bad
tips, including encouraging its customers to deduct personal
expenses as business expenses. The company also falsely inferred
that the IRS has approved the tax program.

Cota worked for the federal tax agency for 33 years, starting in
1963 and working his way up from revenue agent to director of a
Southern California IRS district before retiring in 1996. In 1999,
Cota joined Renaissance and became the director of what the company
dubbed their "Tax Dream Team," a group of people promoted as
Renaissance's tax experts.

As of August 2000, Cota "knowingly joined the conspiracy to
commit fraud," and his credentials as former upper management with
the IRS increased the perceived credibility of the tax program,
according to the plea agreement.

"This is an example of someone implying he has 'insider
information' to help others enrich themselves by buying into his
bogus tax avoidance system," said IRS Criminal Investigation Chief
Eileen C. Mayer in a statement released by officials with the
Department of Justice. "However, what he sold was long-term legal
and financial problems for those who bought his advice."

In his guilty plea, Cota admitted that he and his
co-conspirators - Renaissance company officials - falsely assured
their clients and others that Renaissance's tax system was legal,
misrepresenting that the company had endorsements from over 2,000
attorneys, certified public accountants and IRS agents. The company
also marketed itself by claiming that it was approved as a
continuing education program for licensed financial planners.

Federal prosecutors alleged that Renaissance used Cota's IRS
experience to help recruit people to join Renaissance, to assuage
their concerns, and to keep them as members. People who joined the
company - by October 2000, over 50,000 had joined - earned
commissions by recruiting others to join the multilevel marketing
company, which was a pyramid scheme, according to a December 2006
indictment of Cota and others.

"Renaissance used Cota's credentials as a former district
director for the Internal Revenue Service to lend the tax fraud
scheme legitimacy and to induce people to join and to remain
members," said Eric Melgren, U.S. attorney for the District of
Kansas, in a written statement issued by the U.S. Department of
Justice on Thursday.

Some of the false and misleading information given to members of
Renaissance included tips like creating an employment contract with
children in order to write off more than $4,000 a year for each
child's performance of household chores.

People paid $300 to join the program and an additional $100 a
month to stay a part of it.

Cota is the seventh person to plead guilty to felony charges
stemming from the activities of Renaissance.

The company was founded by Michael Craig Cooper who, according
to Cota's indictment, had no formal tax training and had filed
bankruptcy three times since 1982. According to the indictment of
Cota, Cooper used Renaissance funds to make numerous large
purchases, including motorcycles, expensive cars and a $8,500
diamond ring.